The speculative fervor that pushed up the AMD stock price last year might not return for an encore.

Never an easy company to call, Advanced Micro Devices Inc. (NASDAQ:AMD) has again lived up to its difficult reputation. Only a week in, October is so far very favorable to the AMD stock price, gaining over 4%. Year-to-date, Advanced Micro is up nearly 18%, in between high-flying Nvidia Corporation (NASDAQ:NVDA) and grounded Intel Corporation (NASDAQ:INTC).

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As expected, enthusiasm runs strong for AMD stock. A cursory look at the top InvestorPlace stories for Advanced Micro reveals that most analysts are optimistic. Even I, who has admittedly been skeptical about the company completing its turnaround, am open to changing my perspective. We can talk all we want about the fundamentals, but at the end of the day, the markets will decide.

But that reasoning cuts both ways. Naysayers will point to the fact that the AMD stock price had its best close in late February. Since then, shares have attempted to break through this resistance barrier, but to no avail. Currently, the semiconductor manufacturer is down more than 12% from its Feb. 7 closing peak.

You don’t have to be a technical analysis guru to figure out that the inability to break a price ceiling suggests that the bulls are tiring. On the flipside, it could be an opportunity for the bears.

Warning Signs are Flashing for the AMD stock price

InvestorPlace contributor Will Ashworth reported perhaps an alarming point about AMD stock. According to financial analytics firm S3 Partners, short interest in Advanced Micro shares recently reached an all-time high. Given its enormous rally last year, a record-level short interest isn’t something to ignore.

Ashworth, though, questioned bearish traders’ efficacy. As he notes:

“The interesting aspect of AMD’s short interest is that the AMD stock price continues to keep up with NVDA, despite a 6.1% increase in the number of AMD shares shorted — 158.1 million on Sept. 15 versus 149.0 million on Aug. 31 — over the past two weeks.

Yet, from Aug. 31 through Oct. 3, AMD stock is up 3.2%, compared to 5.9% for NVDA stock over the same period. And both are higher than the 2.7% return for the SPDR S&P 500 ETF Trust (NYSEARCA:SPY).

If the shorts are trying to break AMD, it doesn’t seem to be working.”

Indeed, if we’re looking at the current picture, it’s tough being a bear. At the same time, the movement in the AMD stock price isn’t what I would call convincing. But investors shouldn’t waste too much time overanalyzing the short interest data to figure out their next trade.

Going back to July of 2013, the short interest and the AMD stock price has a 42% inverse correlation. This simply means that as short interest rises, AMD shares have a tendency to fall. Thus, if we looked at the record shorts in a vacuum, we’d be tempted to sell.

Of course, nothing in the markets work in a vacuum. And from a statistical point-of-view, a 42% correlation has a moderate strength of relationship. In other words, the bearish signals should be looked at, but don’t offer the final verdict.

Can Lightning strike twice for AMD stock?

Still, I’m a little bit hesitant of engaging Advanced Micro at this juncture. The common contrarian thesis is that you buy when there’s blood on the streets. But the AMD stock price isn’t bleeding; it’s just treading water. So I don’t want to go full contrarian as too much risk is involved.

The other countering point is market psychology. AMD stock isn’t a surprise to anyone at this point. After skyrocketing to new plateaus, those who have profited handsomely will likely bail out at the first sign of trouble. That sign could be flashing right now. Also, it’s a tough proposition to get new buyers to believe in yet another miracle rally.

Fundamentally, it’s the same story. No one is surprised that the AMD stock price is firmly in double-digits. Conservative investors will now chalk that up to a combination of speculation and good fortune. Any that are interested in AMD long term will eventually deep-dive the financials.

But as our own Vince Martin argues, the market rally of AMD stock is impressive; its valuation is a tale of contrasts. Martin states:

“AMD stock trades at 40 times next year’s consensus earnings-per-share estimate. The company’s 2020 target is for EPS of 75 cents per share. Unless AMD trades at 21x+ that figure at that point — or beats that target — the current price isn’t terribly attractive, given the time value of money.”

I think we have to be real: speculators largely drove up the AMD stock price last year. Others simply ignored the financials and rode the market higher. Sometimes, good fortune is the key ingredient to our portfolios. But at this level, AMD is a speculative entity pretending to be otherwise. That rehashed story may not be appealing to the original round of investors.

As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities